FROM CHALLENGES TO OPPORTUNITIES: LEGAL REFORMS FOR SMALLHOLDERS IN MALAYSIA’S PALM OIL MARKET

Arif Husaini Mohammad Rohimi; Haniff Ahamat

doi:10.51200/mjbe.v12i1.6525

Authors

Arif Husaini Mohammad Rohimi
Haniff Ahamat

DOI:

https://doi.org/10.51200/mjbe.v12i1.6525

Keywords:

Market Regulation, Upstream Palm Oil Industry, Malaysian Legal Reforms, Palm Oil Law, MSPO Certification

Abstract

The Malaysian palm oil industry serves as a critical economic driver, particularly with smallholders contributing significantly to the upstream sector. However, these smallholders encounter numerous challenges, including limited resource access, fluctuating market prices, and stringent regulatory standards. This study conducts a legal analysis of the regulatory framework governing Malaysia's upstream palm oil sector, focusing on smallholders' interests. Utilizing a doctrinal legal research methodology, the study examines relevant laws, regulations, case law, and scholarly literature to identify key challenges and assess regulatory effectiveness. Findings reveal significant issues related to land ownership, market instability, environmental concerns, and the financial burden of certification, impacting smallholders’ market access and competitiveness against larger plantation companies. To promote sustainability and equitable development, the study proposes legal reforms, including a dynamic pricing mechanism for fair compensation, a centralized platform for transparent market information, strengthened smallholder cooperatives, and streamlined MSPO certification processes. Addressing these reforms will empower smallholders and foster a more resilient palm oil sector in Malaysia.

Author Biographies

Arif Husaini Mohammad Rohimi

Faculty of Law, Universiti Kebangsaan Malaysia (UKM)
Jalan Tun Ismail Ali
43600 Bangi, Selangor Darul Ehsan

Haniff Ahamat

Faculty of Law, Universiti Kebangsaan Malaysia (UKM)
Jalan Tun Ismail Ali
43600 Bangi, Selangor Darul Ehsan

References

Competition Act 2010 (Act 712).

Environmental Quality (Prescribed Activities) (Environmental Impact Assessment) Order 1987, P.U.(A) 362/1987.

Environmental Quality Act 1974 (Act 127)

Farmers' Organization Act 1973 (Act 109).

Land Acquisition Act 1960 (Act 486).

Malaysian Palm Oil Board (Licensing) Regulations 2005, P.U.(A) 516/2005.

Malaysian Palm Oil Board Act 1998 (Act 582).

National Land Code (Revised - 2020) Act 828.

Natural Resources and Environment (Prescribed Activities) (Environmental Impact Assessment) Order 2015, P.U.(A) 195/2015

Occupational Safety and Health Act 1994 (Act 514).

Pesticides Act 1974 (Act 149).

Pesticides Regulations 1984, P.U.(A) 251/1984.

Abiddin, N. Z., Ghazali, M. F. M., Yahya, S. I., Jantan, N. & Halim, N. H. A. (2023). Exploring the wellbeing and challenges faced by smallholder plantation farmers in Malaysia: A systematic review. Environment and Social Psychology 8(1). https://doi.org/10.18063/esp.v8.i1.1574

Ahmad, M., Ismail, R. & Ghani, F. (2023). Review on socioeconomic and sustainability of oil palm plantations among rural communities in Malaysia. IOP Conference Series: Earth and Environmental Science, p.012054.

Ali, A., Noah, R. M. & Abd Malik, S. (2018). Legal Implications on Mismanagement of Agrochemicals in Smallholders' Agro Production in Malaysia. Journal of ASIAN Behavioural Studies 3(7), 59-66.

Azima, A., Er, A., Lyndon, N. & Yew, V. W. (2018). Mendepani kekangan inovasi dan teknologi dalam kalangan pekebun kecil sawit di Sabah. Geografia. Malaysian Journal of Society and Space 14(2), 56-67.

Aziz, N. F., Chamhuri, N. & Batt, P. J. (2021). Barriers and benefits arising from the adoption of sustainable certification for smallholder oil palm producers in Malaysia: A systematic review of literature. Sustainability 13(18), 10009.

Carvalho, F. P. (2006). Agriculture, pesticides, food security and food safety. Environmental science & policy 9(7-8), 685-692.

Dani, R. (n.d). Malaysia Agrochemicals Market. Malaysia Agrochemicals - Market Share Analysis, Industry Trends & Statistics, Growth

Forecasts 2019 - 2029. https://www.researchandmarkets.com/reports/5318462/malaysia-agrochemicals-market-share-analysis?srsltid=AfmBOorZ14lrS4tdXO898CBkQgG1Dz-DB4LXQYJc3GPbGp8-_gVQKm-r

Darras, K. F., Corre, M. D., Formaglio, G., Tjoa, A., Potapov, A., Brambach, F., Sibhatu, K. T., Grass, I., Rubiano, A. A. & Buchori, D. (2019). Reducing fertilizer and avoiding herbicides in oil palm plantations—ecological and economic valuations. Frontiers in Forests and Global Change 2, 65.

Dowler, C. (2020). Revealed: The pesticide giants making billions on toxic and bee-harming chemicals. https://unearthed.greenpeace.org/2020/02/20/pesticides-croplife-hazardous-bayer-syngenta-health-bees/#:~:text=Its%20members%20Syngenta%2C%20Bayer%20Crop,the%20world%20by%20agrochemical%20turnover. [9 July].

Er, A. & Siwar, C. (2015). Penanaman sawit lestari dan impak sosioekonomi. e-BANGI 10: 57-80.

Hafizuddin-Syah, B., Shahida, S. & Fuad, S. H. (2018). Sustainability certifications and financial profitability: An analysis on palm oil companies in Malaysia. Jurnal Pengurusan 54(2018), 143-154.

Hai, T. C. (2002). The palm oil industry in Malaysia. WWF, Malaysia:

Hashim, F., Bakar, K. A. & Stapa, S. H. (2020). Analisis appraisal mengenai keterlibatan generasi muda Felda dalam industri kelapa sawit. Malaysian Journal of Social Sciences and Humanities (MJSSH) 5(11), 257-271.

Health, D. O. O. S. A. (2006). Guidelines on Occupational Safety and Health Act 1994.

Hussin, M. R. M., Asaari, M. H. a. H., Karia, N. & Ali, A. J. (2012). Small farmers and factors that motivate them towards agricultural entrepreneurship activities. Journal of Agribusiness Marketing, 5, (December 2012), 47-60.

Jalil, N. A., Yusof, R., Yusof, H., Karim, N. a.-H. A., Ismail, K., Yin, K. Y., Razak, A. Z. a. A., Yunus, N. K. Y. & Samsudin, N. (2014). Status Ekonomi Pekebun Kecil Kelapa di Hilir Perak and Perak Tengah: Economic Status of Coconut Smalholders in Hilir Perak and Perak Tengah. Management Research Journal 3, 107-119.

Kennedy, I., Skerritt, J., Johnson, G. & Highley, E. 1(1998). Seeking agricultural produce free of pesticide residues. Proceedings of an international workshop held in Yogyakarta, Indonesia, 17-19 February 1998.

Khoo, D. (July, 19, 2024). Gov proposes for consolidation of oil palm smallholders to bigger clusters. https://www.thestar.com.my/business/business-news/2024/03/05/gov-proposes-for-consolidation-of-oil-palm-smallholders-to-bigger-clusters [9 July].

Kumaran, S. (2019). The dynamics for mandatory MSPO certification scheme to be successfully implemented. Journal of Oil Palm, Environment and Health (JOPEH) 10, 1-7.

Ligong, S. & Imang, U. (2017). Penglibatan Penduduk Rumah Panjang Kampung Sungai Bawang, Sibu dan Sungai Saeh, Miri, Sarawak dalam Sektor Tanaman Kelapa Sawit: Isu dan Cabaran: Involvement of Longhouse Residents at Kampung Sungai Bawang, Sibu and Sungai Saeh, Miri, Sarawak in Oil Palm Sector: Issues and Challenges. Geografi 5(2), 59-68.

Mahat, S. B. A. (2012). The palm oil industry from the perspective of sustainable development: A case study of Malaysian palm oil industry. Graduate School of Asia Pacific Studies, Ritsumeikan Asia Pacific University of Japan. https://api.semanticscholar.org/CorpusID:131116338.

Manaf, A. A. & Choy, E. A. (2015). Isu pemilikan tanah dan implikasinya terhadap produktiviti pekebun kecil: Kajian kes pekebun kecil di Lahad Datu, Sabah (Land ownership issue and its implications for smallholder productivity: The case of oil palm smallholders in Lahad Datu, Sabah). Geografia 11(9). Malaysian Journal of Society and Space.

Marzukhi, H., Mawar, M. Y., Hameed, L. B. M. & Jamil, M. R. M. (2021). Smallholder Farmers in Malaysia’s Oil Palm Industry: Issues and Challenges: Petani Pekebun Kecil dalam Industri Kelapa Sawit Malaysia: Isu dan Cabaran. Journal of Management and Muamalah 11(2), 157-170.

May, D. E. (2012). Addressing biodiversity loss when international markets of agricultural commodities are oligopolistic. Economics and Business Letters 1(1), 53-57.

Mazlan, M. N., Saili, A. R., Saili, J., Zulkefli, F., Syahlan, S. & N.A. (2020). Exploring the challenges of pepper smallholder farmers in Sarawak: a qualitative study. Food Research, 96-103.

Md Ali, A. (2021). Industri nanas: peranan dan cabaran dalam penjanaan ekonomi Malaysia. Journal of Economics and Sustainability (JES) 3(2), 1-15.

Mohanty, S. (2006). Trade and environment dimensions in the food and food processing industries in Asia and the Pacific. Regional Study, New Delhi: Research and Information System for the Non Aligned and Other Developing Countries.

Mordor Intelligence, M. (n.d). Agrochemical Market in Malaysia Size & Share Analysis - Growth Trends & Forecasts (2024 - 2029). https://www.mordorintelligence.com/industry-reports/agrochemicals-market-malaysia

MPOB. (n.d). Kriteria dan Panduan Permohonan Lesen MPOB. Lembaga Minyak Sawit Malaysia (MPOB).

MPOB. (27, June, 2024). Mandatory MSPO Certification. https://mspo.org.my/faqs#mandatorymspocertification .

MPOB. n.d. Notification on MPOB Daily Fresh Fruit Bunches (FFB) Reference Price at 1% OER. MPOB Daily Fresh Fruit Bunches (FFB) Reference Price [27 June].

MPOCC. (2024). MSPO Trace: Malaysian Palm Oil Certification Council. https://www.mspotrace.org.my/Home.

Nagiah, C. & Azmi, R. (2013). A review of smallholder oil palm production: challenges and opportunities for enhancing sustainability-a Malaysian perspective. Journal of Oil Palm, Environment and Health (JOPEH) 3(12), 114-120. DOI:10.5366/jope.2012.12

Ng, Y. G., Bahri, M. T. S., Syah, M. Y. I., Mori, I. & Hashim, Z. (2013). Ergonomics observation: Harvesting tasks at oil palm plantation. Journal of occupational health 55(5), 405-414.

Onozaki, T. & Yanagita, T. (2003). Monopoly, oligopoly and the invisible hand. Chaos, Solitons & Fractals 18(3), 537-547.

Othman, J. & Jafari, Y. (2014). Selected research issues in the Malaysian agricultural sector. Jurnal Ekonomi Malaysia 48(2), 127-136.

Pahmi, A. H. B. C. H., Choy, E. A., Rahmi, A. A. B. & Jamean, E. S. B. (2022). Isu dan Cabaran Sektor Huluan dan Hiliran Industri Sawit. e-BANGI 19(3), 67-90.

Rahman, A. (2021). Application of Pesticides Act 1974 in protecting community and environment health in Malaysia from the exposure of pesticides. Int J Acad Res Bus Soc Sci 11(15), 144-153.

Rahman, N. A. & Ahamat, H. (2020). Competition law in Malaysia. Kluwer Law International BV.

Rahman, S. (2020). Malaysian independent oil palm smallholders and their struggle to survive 2020. https://scholar.google.com.my/scholar?q=Rahman,+S.+(2020).+Malaysian+independent+oil+palm+smallholders+and+their+struggle+to+survive+2020.&hl=en&as_sdt=0&as_vis=1&oi=scholart

Ritchie, H. & Roser, M. (2024). Palm oil. https://ourworldindata.org/palm-oil?ref=zadbajoswojezdrowie.com.

Rival, A. & Levang, P. (2014). Palms of controversies: Oil palm and development challenges. Cifor. https://doi.org/10.17528/cifor/004860

Rose, R. a. C. & Elias, S. A. (2021). Implikasi Kejatuhan Harga Buah Kelapa Sawit Dan Pengaruhnya Terhadap Pendapatan Penduduk Setempat. e-Jurnal Penyelidikan dan Inovasi, 56-86.

Saad, S., Yusof, M. & Lyndon, A. (2017). Peranan Pemimpin Pendapat dalam Penyebaran Inovasi Penanaman Kelapa Sawit. Jurnal Komunikasi Malaysian Journal of Communication Jilid 33, 73-88.

Santosa, S. J. (2008). Palm oil boom in Indonesia: from plantation to downstream products and biodiesel. CLEAN–Soil, Air, Water 36(5‐6), 453-465.

Senawi, R., Rahman, N. K., Mansor, N. & Kuntom, A. (2019). Transformation of oil palm independent smallholders through Malaysian sustainable palm oil. Journal of Oil Palm Research 31(3), 496-507.

Shafiai, M. H. M., Ali, S. A. & Yaacob, S. E. (2020). Kesan sikap, faktor halangan dan manfaat tanggapan pekebun kecil sawit persendirian kepada niat menggunakan mikro kredit Islam. Islamiyyat 42(1), 3-14.

Shafinah, K., Sahari, N., Sulaiman, R., Alan, R. & Zakry, F. A. A. (2013). Kebolehcapaian nasihat bagi pengurusan penyakit tanaman oleh pekebun kecil lada hitam, Sarawak: Tinjauan awal (Critical extension services and the plight of Sarawak’s black pepper farmers: A preliminary survey). Geografia 9(2), Malaysian Journal of Society and Space. ISSN 2180-2491. https://www.researchgate.net/publication/274255017_Kebolehcapaian_nasihat_bagi_pengurusan_penyakit_tanaman_oleh_pekebun_kecil_lada_hitam_Sarawak_Tinjauan_awal

Siti-Dina, R. P., Er, A. C. & Cheah, W. Y. (2023). Social Issues and Challenges among Oil Palm Smallholder Farmers in Malaysia: Systematic Literature Review. Sustainability 15(4): 3123.

Sogen, D. D. (2023). Implementation of Competition Law In Cooking Oil Price Trading For Public Interest. Journal Research of Social Science, Economics, and Management 2(9): 1932–1942-1932–1942.

Taylor, C. R. & Moss, D. L. (2013). The fertilizer oligopoly: The case for global antitrust enforcement. The American Antitrust Institute, USA:

Tsolomyti, G., Magoutas, A. & Tsoulfas, G. T. (2021). Global corporate concentration in pesticides: agrochemicals industry. Business Intelligence and Modelling: Unified Approach with Simulation and Strategic Modelling in Entrepreneurship 8th, 289-297.

Yap, P., Rosdin, R., Abdul-Rahman, A., Omar, A., Mohamed, M. & Rahami, M. (2021). Malaysian sustainable palm oil (MSPO) certification progress for independent smallholders in Malaysia. IOP Conference Series: Earth and Environmental Science, p.012071.

Yi, C. S., Radam, A., Hassan, A. & Shamsudin, M. N. (2018). Market Structure of Malaysian Palm Oil Refining Industry. Asian Academy of Management Journal, 23(2), 125-141.